Recent Experience and Financial Decision Making: Does Intensity in Chronic Regulatory Focus make a Difference?

Outcome of prior investment plays an important role in subsequent similar financial decision making, subject to intensity of an individual’s chronic regulatory focus. This study proposes that people may behave differently after experiencing the same outcome due to the moderating effect of the intensity of chronic regulatory focus. Using an experimental approach, with 110 adults, this study demonstrates that individuals tend to be more risk-seeking in subsequent similar financial decision making upon a success, as compared to a failure, in their prior investment. The intensity of chronic regulatory focus moderates the effect of a prior investment success, specifically, individuals with higher intensity of chronic regulatory focus tend to be more risk-seeking than those with lower intensity of chronic regulatory focus in the success condition. In a failure condition, most individuals tend to be more risk averse after a big failure in previous investment.